Local Bells to sell long distance: Don't renegotiate your contract yet

Bell Atlantic, a NY baby Bell, is now selling long distance in addition to local service. Will this help your company get a better deal? Maybe it will—eventually.

Local baby Bells are starting to get into the long-distance market. Eventually, that could mean lower prices for the budget-conscious CIO looking for a telecom bargain or a package deal on data and telephone services—but it may be some time in coming.

Early this spring, business phone subscribers in NY state will be able to buy both their local and long distance services from the same carrier, Bell Atlantic. Since the company has now learned what is required to gain FCC approval, Bell Atlantic also is proposing to offer long distance in MA and continue through the rest of the states in its region, said Bob Myers, director of integrated marketing at Bell Atlantic.

Do we really need another vendor?
Some analysts say it’s too soon to tell how this will affect the long distance business phone market.

So, should a CIO hurry to renegotiate all contracts?

Not so fast, said Boyd Peterson, an analyst with the Yankee Group.

“I wouldn’t rush out and renegotiate,” he said, noting that Bell Atlantic’s entry won’t have much impact on long-distance prices right away because prices will fall only as costs fall.

Eventually, good things will happen for businesses, he said. They will see more integrated suites where DSL, local, and long distance will be packaged creatively as the local markets open up to competition. Now that Bell Atlantic has received approval in NY, all the Bells know exactly what’s required to open local markets to competition and will do so to enter the lucrative long-distance market.

“The goodness that comes out of this is increasing the local competitiveness,” Peterson said.

More products to choose from
Bell Atlantic has an ambitious number of new products to introduce in its long distance roll out.

According to Myers, the company plans to introduce voice long distance in the first quarter, global private line and global frame relay services in the second quarter, and global ATM by midyear. Managed services will be offered concurrent with each product launch, he said.

The data services will be available in NY, as well as in 32 states that are not in its local region, and will be competitively priced, Myers said. “We are looking to get into the market to make noise,” he said.

A flat-rate voice long-distance product will be offered that “will really make a difference” to many business customers. Although many businesses are under major contracts, 30 percent of voice minutes are up for grabs in NY. He said the company’s pricing plan, and its experience with offering long distance in other states, will make it very competitive.

Bell Atlantic, which operates in 13 states and the District of Columbia, plans to gain FCC approval for long distance in all of its regions. It worked for four years to fulfill a 14-point checklist to ensure that it had opened up the local phone market to competition in NY, which was required before gaining long-distance approval.

“New York is the crown jewel,” said Myers. “It is a very significant market and an opportunity to make a first contact with a lot of people.” The total business long distance market there is $5 billion. Bell Atlantic expects to have 25 percent to 30 percent of that within five years. The NY market also includes a $1.6 billion data transport opportunity.

Much ado about nothing
Jeanne Schaaf, an analyst at Forrester Research, believes the impact of the FCC’s decision in NY is overrated. She thinks CIOs may be able to get a good deal if they want piecemeal service, if they have most of their employees in NY, or if they want a redundant service provider, but Schaaf believes Bell Atlantic cannot be competitive right now.

“It’s a great thing that they have New York,” she said.

But Bell Atlantic has not yet submitted any other states to the FCC for consideration. Getting approval for each state is apt to take as long as nine months after submission, meaning “it could be three years before they hit the bulk” of the business, Schaaf said.

The company is only one more competitor in an already crowded market, she explained. “Unless they have been deploying next-generation technology, they can’t be that cost competitive.”

Myers at Bell Atlantic, however, said the NY baby Bell is ready. It has a data solutions group that offers network integration, outsourcing, call center services, and a suite of Internet services that include Web hosting, dedicated Internet access, remote access services and Internet and Extranet services. The company is merging with GTE, which will bring it from primarily a Northeast United States company to an international one, he said. In addition, the company also owns 10 percent of Metromedia Fiber Networks, which will provide it with low-cost access to 50 major metropolitan U.S. markets via MFN’s fiber optic infrastructure.

“Within one to two years, we will be able to offer full service to business customers anywhere,” Myers said.

Randi Hicks Rowe is a writer and communications consultant in Washington D.C. She specializes in business-to-business communications, including financial services and technology.

Would you buy your long distance from your local telephone company? Do you think this would be a good move for business? Tell us what you think by dropping us a note.

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